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Alberto Abaterusso
Alberto Abaterusso
Articles (1347) 

South African Investor Decreases Stake in Anglo American

Public Investment Corp now owns 12.9% of the mining company

December 06, 2018 | About:

Anglo American PLC (LSE:AAL) announced Wednesday that Public Investment Corp., a South African state-owned entity with $150 billion in assets under management, decreased its direct holding in the company to 12.942% from 13.290%. The stake represents approximately 181.8 million ordinary shares of the company.

Following the announcement, shares of the London-based mining company declined 4.87% to 15.45 British pounds ($19.7) on Thursday on the London Stock Exchange, sending the forward dividend yield up to 4.44%.

Further dips may follow. For the 52 weeks through Dec. 6, the stock has increased 14.3% but it is still below the 200-, 100- and 50-day simple moving average lines, as illustrated in the Yahoo Finance chart. 

Source of the chart: Yahoo Finance

Over the same period, Anglo American has outperformed the Van Eck Vectors Gold Miners Exchange-Traded Fund (GDX) by 23.71%. The share price at close on Thursday was 16.9% above the 52-week low of 13.22 British pounds and 26.1% below the 52-week high of 19.48 pounds.

Source of the chart: Yahoo Finance

Other indicators on Anglo American:

  • Market capitalization is 19.634 billion pounds.
  • The 14-day Relative Strength Indicator is 41.
  • The EV-to-Ebitda ratio is 3.98.

Thanks to high profitable operations Anglo American is running in the Americas, Finland, Africa, Asia and Oceania, the miner has beaten most of its competitors in terms of a higher earnings before interest, taxes, depreciation and amortization margin over the last 12 months through June 30, despite rising input costs. Anglo American posted a trailing 12-month EBITDA margin of 31.2% versus an industry median of nearly 24%. The margin grew thanks to increases in total revenue and EBITDA for the first half of 2018 compared to the prior-year period.

The miner posts financial results every six months and closed the first half of 2018 with an 11% year-over-year increase in EBITDA to $4.6 billion and a 13% increase in revenue to $13.7 billion. Revenue has backed by a net profit of $1.21 per share or earnings attributable to equity shareholders of $1.3 billion.

Operations for the first six months of the year generated free cash flow of $1.6 billion, which was also used to distribute dividends to shareholders.

A fraction of free cash flow was used by the company to advance the Quellaveco copper project in Peru, where Anglo American is hoping to produce the red metal from 1.3 billion tons of mineral reserves over a 30-year period. The miner plans to produce the first copper in 2022.

During the first six months of 2018, Anglo American mined and processed the following minerals and metals:

  • The production of diamonds went up 8% to 17.5 million metric carats.
  • Copper increased 10% to 313,000 tons.
  • Platinum rose 4% to 1.233 million ounces.
  • Palladium increased 5% to 813,000 ounces.
  • Iron ore from Kumba mining and supplying company in South Africa went up 3% to 22.4 million tons.
  • Iron ore from the mining project in Minas Gerais state, Brazil, decreased 64% to 3.2 million tons.
  • Metallurgical coal increased 17% to 10.8 million tons.
  • Thermal coal declined 6% to 14 million tons.
  • Manganese ore jumped 5% to 1.747 million tons.

The increase in the production of copper was driven by higher grades while the drop in the Brazilian production of iron ore was caused by pipeline inspection and remedial work. The company is anticipating these will be completed in the final quarter of the year.

At its flagship Mogalakwena mine in South Africa, Anglo American is experiencing higher grades and concentrator throughput and improved recovery rates. As a result of these operating improvements, the company has raised full-year platinum production to between 2.4 million and 2.45 million ounces, up from a prior forecast of 2.3 million to 2.4 million ounces.

Total net debt has declined 11% to $4 billion since the end of 2017, so the financial strength of the company's balance sheet has improved. GuruFocus has assigned a financial strength rating of 6 out of 10.

The average recommendation is overweight, meaning analysts expect Anglo American to outperform either its industry or the entire market. The recommendation is the average of 26 ratings. The stock has a target price of British pounds 19.51 per share, reflecting a 26.2% upside over the next 52 weeks.

Disclosure: I have no positions in any securities mentioned in this article.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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